Critical Tax Forms for the Self-Employed

All Sole Proprietors must prepare Schedule C as part of their federal personal income tax return. But it’s likely that you can’t stop there. As the old saying goes – “That’s not all!” There’s a pretty good chance that by filing a Schedule C, you must also file several other forms that are related to Schedule C. Here’s a list of those forms and their relationship to Schedule C.

Schedule SE, Self-Employment Tax.

Go to Schedule C, Line 31. If you have a profit on this line of $400 or more (i.e. your income is greater than your expenses), you will also have to file Schedule SE in order to calculate your federal self-employment (SE) tax, aka the “dreaded” self-employment tax. SE tax is the sole proprietor’s version of the employee’s social security and medicare tax, which are automatically withheld from an employee’s paycheck by the employer. You take the amount from Line 31 of Schedule C and transfer it to Schedule SE, Line 2.

Form 4562, Depreciation and Amortization.

If you purchased any equipment or other so-called “depreciable fixed assets” for use in your business, you will probably have to complete Form 4562 to report those purchases. “Depreciable fixed assets” include both personal property like computers and peripherals, printers, office furniture, office equipment such as fax machines and telephones, other business machinery, as well as real estate such as business buildings. The rules for filling out Form 4562 are quite complex and you’ll definitely want to get some help here. (i.e. Don’t try this at home!) The end result is that your total expense for purchasing business equipment is transferred from Form 4562 to Schedule C, Line 13, Depreciation and Section 179 expense.

Form 8829, Expenses for Business Use of Your Home.

The so-called “Home Office Expense” is one of the best tax breaks for the Sole Proprietor. But it doesn’t come without jumping though some very specific recordkeeping hoops. To get this deduction, you must complete Form 8829. Don’t let the complexity of this form stop you, though. It could be well worth the time and effort. After doing Form 8829, transfer the amount from Line 35 (Allowable expenses for business use of your home) to Schedule C, Line 30.

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